Which of the following is correct regarding vendor rebates?
A) Vendor rebates are generally recorded as a reduction from sales.
B) The rebate is never recognized until it is actually received.
C) If the rebate meets asset recognition criteria, the receivable is allocated to goods sold.
D) Vendor rebates are generally recorded as a reduction in the purchase cost of inventory.

Question

Quizplus · Accepted Answer

Vendor rebates are generally recorded as a reduction in the purchase cost of inventory, which increases the gross profit margin on sales. This means that the rebate is recognized immediately, and reduces the inventory cost, rather than being recorded as a reduction from sales or waiting until it is actually received. If the rebate meets asset recognition criteria, such as being probable and estimable, it may be recognized as a receivable allocated to the goods sold.

Which of the Following Is Correct Regarding Vendor Rebates